Serbia Joblessness Swells as Milosevic-Era Leaders Return

Photographer: Andrej Isakovic/AFP/Getty Images

Ivica Dacic, Milosevic’s wartime spokesman, became prime minister a month ago. Close

Ivica Dacic, Milosevic’s wartime spokesman, became prime minister a month ago.

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Photographer: Andrej Isakovic/AFP/Getty Images

Ivica Dacic, Milosevic’s wartime spokesman, became prime minister a month ago.

Slavica Djukic left the four-story employment office in Belgrade in tears. The former kindergarten teacher hasn’t been offered a single job in 2 ½ years.

“I’m bitter and desperate,” said Djukic, 48, who is also a widow raising a 12-year-old son. The 30 square-meter (320 square-foot) apartment in the Serbian capital she inherited disqualified her from state financial aid, making her rely on her sister for money, until she lost her job too, Djukic said.

Torn apart by the Balkan wars waged by former President Slobodan Milosevic in the 1990s, Serbia is now in a battle to reduce the army of unemployed getting agitated with a jobless rate exceeding the levels of Spain and Greece, home to the longest out-of-work lines in the European Union.

As the rest of Europe focuses on the sovereign-debt crisis, Serbs are turning to two ex-allies of Milosevic to revive an economy also blighted by the continent’s worst-performing currency and rising prices for consumers.

Ivica Dacic, Milosevic’s wartime spokesman, became prime minister a month ago and Tomislav Nikolic, who served as deputy prime minister of the former Yugoslavia toward the end of Milosevic’s regime, was sworn in as president in June. Both men, once barred from entering the EU during the investigation into Milosevic by the war crimes tribunal, have pledged to fix the economy and to lead Serbia into the bloc.

‘More Nationalistic’

“One of the risks is that people turn to more nationalistic behavior if the economy is deteriorating,” Svetlana Logar, research director at Ipsos Strategic Marketing in Belgrade, said in an interview in her office. “Democracy has always been very confusing for Serbians and they’re not aware that democracy is a way to a stronger economy and jobs.”

Since the May 6 elections that brought Dacic to power, the Serbian dinar has been the fourth-worst performing currency of the 178 tracked by Bloomberg worldwide. It has dropped 5.3 percent over the period and traded at 118.1 per euro at 12:38 p.m. in Belgrade.

Serbia had a jobless rate of 25.5 percent in April, the most recent data from the statistics office in Belgrade, up from 14 percent at the beginning of the global financial crisis in 2008. Unemployment topped the list of concerns facing Serbia for 74 percent of respondents in a July poll by Ipsos, followed by corruption and low-living standards.

Eight percent said Kosovo, a lightning rod for nationalists, was the biggest problem, according to the 1,005 respondents. Milosevic was ousted in October 2000 following his conflict a year earlier with the North Atlantic Treaty Organization over Kosovo, which had unilaterally declared independence. The territorial dispute is still unresolved, with Serbia claiming the region.

A focus on the lack of jobs and corruption helped Nikolic, 60, win the May 6 presidential election with votes from people including Djukic, the unemployed widow.

War Thoughts

His election pitch balanced the need to join the 27-member EU with nationalists’ rejection of independence for Kosovo and the need for austerity without giving up on social security. Nikolic ousted Boris Tadic, whose pro-EU Democratic Party dominated the decade since the fall of Milosevic.

“I would go to war if needed to defend what belongs to Serbia,” said Goran Ninkovic, 29, who earns 20,000 dinars ($213) a month as a security guard at a Belgrade office building and who also backed Nikolic. “If I had a good job and a good salary I wouldn’t be thinking about war.”

Belgrade newspaper Blic reported on Aug. 23 that only 40,000 workers in Serbia, or 0.5 percent of all citizens, had an average wage of more than 1,000 euros ($1,254) a month.

In one of its first steps, Dacic’s government placed the central bank under parliamentary control for the first time since the country’s transition to democracy in 2000, drawing objections from the International Monetary Fund and the EU.

As a result, Governor Dejan Soskic quit and was replaced by Jorgovanka Tabakovic, Nikolic’s deputy in the Progressive Party, a member of the new coalition.

Dinar, Inflation

The move pushed the dinar, Europe’s worst-performing currency this year after dropping 12 percent against the U.S. dollar, to a record low.

The government sold debt maturing in 490 days on Aug. 7 at a yield of 14.9 percent, more than double what Spain, the latest focus of the European debt crisis, pays to borrow for 10 years. A day later, Finance Minister Mladjan Dinkic said the government would seek as much as 2 billion euros of “non-market” funds to help meet payments for pensions, wages and welfare.

In line with other parts of Europe, the Serbian economy plunged into its second recession in three years in the first six months of 2012 while the central bank forecasts that the inflation rate may climb to as high as 10 percent by year-end. Consumer prices rose an annual 6.1 percent in July.

Digging Graves

The IMF suspended a precautionary loan of $1.3 billion in February amid signs the previous administration was slipping on budget targets. Such loans are set aside for a country in case of an economic or currency crisis without recipients necessarily drawing on the funds.

Nikolic, whose time managing cemeteries earned him the nickname the “gravedigger,” was a top Radical Party official in the 1990s, rising to deputy prime minister in 1998. Nikolic broke with the Radicals in 2008 to create his own party, the Progressives, which now backs the EU.

He asked Dacic, 46, a journalist by training, to form a government. Dacic transformed Milosevic’s Socialist Party and led it into a coalition with the previous, Democratic Party-led coalition government. As interior minister, Dacic handled the 2008 arrest and deportation of Radovan Karadzic, the Bosnian Serb leader, to the International Criminal Court in The Hague.

Dacic’s offices today face the bombed-out former headquarters of the Serbian Defense Ministry. More than an architectural eyesore on a boulevard lined with government buildings and embassies, the exposed collapsing floors are a raw reminder of the cost of war.

EU Candidate

Serbia became a candidate for EU membership on March 1 after fulfilling a series of conditions, including the capture and transfer to The Hague of Karadzic, Ratko Mladic and Goran Hadzic, war-crimes suspects from the civil wars that accompanied the breakup of the former Yugoslavia. Dacic on June 28 pledged that there won’t be a “return of the 1990s.”

“Many are still not convinced that they are genuinely pro- European,” Sonja Licht, 65, president of the Belgrade Fund for Political Excellence and a former communist-era dissident, said at a riverside café in the shadow of the abandoned Hotel Jugoslavija, which was hit by NATO bombs in 1999. “I’m too old not to remember the role of these people.”

Still, she said the leaders deserve credit for “somehow transforming” a swathe of society previously opposed to the EU into a “different kind of crowd.”

Kosovo Question

More than 80 percent of lawmakers in the Serbian Parliament are members of pro-EU parties. Public backing for EU membership plunged to 46 percent in April, a month before elections, matching the lowest level since the start of measurement in 2002, according to Ipsos. The gauge rose to 56 percent in June after Nikolic triumphed, according to the pollster.

Now the leaders who backed wars over Kosovo must resolve the territorial dispute. Currently 92 United Nations governments, including the U.S., and 22 of the 27 EU members have recognized Kosovo’s independence.

Improving relations with its former province is a condition for Serbia to join the EU. Serbia, which lost control over Kosovo in 1999 when NATO bombing forced it to hand over control to the alliance, would need to amend its constitution for any Serbian leader to recognize an independent Kosovo, which many Serbs regard as the cradle of their nation.

‘Political Suicide’

“At end of the day, all Serbian politicians know Kosovo is lost,” Dimitar Bechev, director of the Sofia office of the European Council on Foreign Relations, said by phone. “But nobody has the guts to sell the message to the public. The moment you make this statement, you can see the loss of Kosovo is your political suicide.”

Delays over Kosovo threaten to widen the gap between Serbia and Slovenia, Croatia and Montenegro, all ex-Yugoslav republics. Slovenia joined the EU in 2004 and adopted the euro in 2007. Croatia aims to join the bloc in mid-2013 and Montenegro began accession talks on June 29.

For Djukic, the widowed mother, keeping afloat while waiting for Serbia’s fortunes to turn is an uphill challenge. Djukic now saves money by not paying her utility bills.

“I want to fight for survival but sometimes I just feel like giving up,” Djukic said.

To contact the reporters on this story: Zoltan Simon in Budapest at zsimon@bloomberg.net; Gordana Filipovic in Belgrade at gfilipovic@bloomberg.net

To contact the editors responsible for this story: Balazs Penz at bpenz@bloomberg.net; James M. Gomez at jagomez@bloomberg.net

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